Víctor Álvarez, Vice Minister of
Industry, Head of the Delegation of the Bolivarian Republic of
Venezuela to the Fifteenth Meeting of the Trade Negotiations
Committee

To:

Delegations of the countries
participating in the TNC of the FTAA

Re:

Structural Convergence Funds in the
FTAA

Date:

Port of Spain, Trinidad, 29
September to 3 October 2003

On the occasion of the Fifteenth Meeting of the Trade
Negotiations Committee (TNC), I would like to transmit the vision of the
Bolivarian Republic of Venezuela regarding the current status of the FTAA
negotiations and propose concrete actions that will enable us to
successfully face the challenges created by an Agreement in which a range
of countries participate, countries that differ not only in their history,
culture and language, but also in the size of their economies and levels
of development.

The Co Chairmanship has asked two
questions in an effort to build a shared vision of the current status of
the FTAA negotiations:

What level of ambition, if any,
should be achieved in each area under negotiation while reaching a
general equilibrium in the negotiations?

How would your government
propose achieving this objective?

Level of Ambition

The debate is focused mainly on the
following:

The dates for completing the negotiations; and

The coverage of the agreement.

The current status of the
negotiations reflects a series of points lacking definition in most of the
negotiating groups, which translates into stagnation or little progress in
the process.

In the view of the Government of the
Bolivarian Republic of Venezuela, the lack of willingness and creativity
to tackle the causes of these difficulties and the recent WTO-Cancun
effect expose the unfeasibility of the proposed date for the completion of
the negotiations, as well as the need to review the substance of the broad
initial proposal.

Since the last Summit of the
Americas, held in Québec City, Venezuela has been emphasizing the need to
postpone the end dates of the negotiations and the establishment of the
FTAA and to limit the issues under negotiation, as well as the coverage
and scope of the same.

This proposal was ratified in the
letter submitted by the delegation of Venezuela at the last Ministerial
Meeting, held in Quito, and in several memoranda presented at the
Thirteenth TNC, held in Puebla, and at the Fourteenth TNC, held in San
Salvador. At this meeting, the delegation of Venezuela, in addition to
again requesting that the date of the agreement be postponed, also noted
the need to review and limit the themes currently under negotiation.

In the case of Venezuela, regardless
of the agreement that is ultimately reached, it must be validated by the
democratic will of our people through a referendum. It does not represent
a voluntary decision of the government, but rather a mandate of Article 73
of the Constitution of the Bolivarian Republic of Venezuela that
conditions approval of an agreement such as the FTAA to acceptance by our
citizens through a referendum.

On repeated occasions, presidential
and ministerial declarations on the FTAA have established mandates and
commitments regarding transparency in the negotiation process.
Transparency in the negotiation process is a sine qua non condition
for civil society’s participation in the follow up of the process.

Up to now, however, transparency has
been very limited. The existence of brackets, with no mention as to which
countries has suggested the proposal, makes it practically impossible for
the people of any given country to identify their respective government's
negotiating position.

As Kenneth Valley, Minister of
Industry and Trade of Trinidad and Tobago, unequivocally stated at the
outset of this meeting, the FTAA negotiations are not only technical, but
also carry increasingly political and social implications which, if not
properly managed, will inevitably exacerbate the expressions of protest
towards the FTAA. Resistance to the FTAA is on the rise in an increasing
number of political and social sectors in each and every one of our
countries, in response to a negotiation process about which they know very
little or nothing at all.

The Honorable Minister Valley stated
that:

“Beyond all the technical
discussions, the fact is that trade negotiations are no longer simply
the realm of the specialists. Today, trade issues are at the heart of
domestic politics and foreign policy. Thus, we must acknowledge the
political and social nature of the process towards a hemispheric free
trade area. The certainty that we have a joint commitment and a set of
common goals and objectives will help us to construct patiently, a
vigorous consensus in all delicate matters.”1

Therefore, as the deadlines
approach, the possibilities of our government being able to properly
inform our citizens, thereby avoiding unnecessary resistance and
hostility, also decrease.

The more the negotiations are
expedited in this phase, the fewer possibilities there will be for
fostering a democratic, informed public debate on the implications of
these negotiations.

Democratic decisions require more
time

Launching the FTAA assumes the
revamping of the political and institutional structure of the States,
which will translate into strong pressure and demands to effect key
changes to the Constitution, laws and institutions. In fact, one of the
general principles established at the Fourth FTAA Ministerial Meeting
cleraly states this point. The principle states the following:

“All countries shall ensure that
their laws, regulations, and administrative procedures conform to their
obligations under the FTAA agreement.”

This being the case, the FTAA cannot
continue to be negotiated as if it were only a series of trade
negotiations in which only experts and specialists in the different areas
of commercial and international law participate. As Minister Valley wisely
indicated, democratic negotiations need to effectively incorporate all
sectors of the population continent-wide, considering that every sector
will be affected to some extent by the agreements being negotiated. This
requires much more time than has been proposed to date.

The intent to increase the pace of
the negotiations and the limited time periods that Venezuela has been
given in this negotiation process negate any real possibility for
democratic participation in the issues under negotiation.

The only way we will be able to
state that we are moving towards a democratic integration process is if
the negotiation process is transparent to society as a whole.

In order to have greater
transparency, as well as full access for societies to all information and
to public discussions on the FTAA negotiations, the timetables for the
negotiations would have to be changed. These are the necessary costs of
democracy.

The demand for a democratic,
transparent process, access to information, and the right to participate
in the FTAA decision-making process stems, fundamentally, from the fact
that the Agreement is much more than a limited trade agreement. On the
contrary, the Agreement covers the broadest range of collective life in
its institutional, political, social and cultural dimensions.

It is not enough to liberalize trade
and investment in order to guarantee progress towards greater development
and collective well-being. The success of the FTAA must be measured
against the improved quality of life of our citizens and not only in light
of increased trade and investment flows.

Without specific mechanisms aimed at
achieving a significant reduction in the disparities among the different
regions, countries, and production activities, free competition among
unequal parties can only lead to the strengthening of the largest
countries with higher levels of development and still further weaken the
smallest economies and countries with a lower level of development.

Overcoming this challenge demands
the creation of effective mechanisms, such as the Regional Integration
Funds proposed by various delegations, or the Compensation and Structural
Convergence Funds proposed by other delegations at the last meeting of the
TNC, held in El Salvador. This effort also requires more time than that
being proposed.

Inequalities in the Levels of
Development

The negotiations of the Free Trade
Area of the Americas started out against the backdrop not only of abysmal
differences in the sizes of the economies, but also of extraordinary
differences in the levels of development.

One of the key goals of a successful
integration project, as demonstrated by the experience of the European
Union, is to ensure that integration allows for concrete steps to be taken
towards significantly reducing these huge inequalities.

This requires firm commitments to be
made—with procedures that guarantee their fulfillment—so that the
implementation of the Agreement can make an effective contribution to
reducing these inequalities.

The issue of the vast inequalities
with which the FTAA negotiations process started has been recognized time
and again in the documents issued at Presidential Summits and Ministerial
Meetings. The Quito Ministerial Declaration states:

“We reaffirm our commitment to
take into account in designing the FTAA, the differences in levels of
development and size of economies in the Hemisphere, in order to ensure
that these economies participate fully in the building of, and benefits
resulting from, the Agreement…”

The measures that have been
discussed under the issue of "preferential treatment" or under the
category of "smaller economies" neither pave the way for nor provide
guidelines for policies that could effectively contribute to a significant
reduction in these vast differences. It is not really a matter of large
and small economies, but of highly distinct economic structures.

The measures concentrated on so far
have been limited to strengthening the countries’ technical capacity to
tackle the FTAA negotiations, but no decisions have yet been made
regarding the necessary and urgent measures that must be applied in order
to reduce and eliminate the profound imbalances that exist among our
countries.

If action is not taken to improve
social conditions and the conditions of production, highly unequal
countries will be treated as equals and forced to compete under the same
rules despite their relative backwardness and weaknesses.

It is therefore indispensable, if we
are to comply with the FTAA’s commitments and regulations, that we move
from technical assistance measures and extensions of deadlines
towards the creation of the structural convergence mechanisms and funding
necessary to correct the asymmetries and disparities between those
countries currently involved in negotiating the agreement.

There is much more that can and must
be done within the framework of the Hemispheric Cooperation Program. Only
pursuing technical assistance measures as a means of ensuring that
countries are in a position to participate in the negotiations does not
adequately address the divide which separates the different countries
negotiating the FTAA.

Neither technical assistance for the
negotiations and adaptation of the agreement nor time periods of several
years resolve those problems.

This issue is of particular concern,
in light of the fact that the “General Objectives and Principles” of the
negotiation of the Agreement stipulate that “The rights and obligations of
the FTAA must apply to all countries." Intrinsic in this is the demand for
a certain principle of reciprocity among economies and economic
agents that are vastly unequal.

An agreement with equal conditions
for all among vastly unequal economies can only benefit the strongest at
the expense of the weakest countries.

For progress to be made in reducing
these vast inequalities, it is of paramount importance that we embrace the
challenge and assume firm commitments, which will necessarily demand a
significant transfer of resources from the more developed to the less
developed countries.

For the smaller economies and
less-developed countries, the real possibility of taking advantage of the
opportunities generated by a Free Trade Area does not depend solely on
tariff-reducing measures. It will also depend on investments for the
improvement of the conditions in their productive and social environment,
as well as on changes in prevailing competition conditions in the main
markets of the Hemisphere. These markets still contain enormous barriers
to our exports.

The sincere will to resolve the
issues regarding developing countries’ access to different markets must
necessarily be translated into the correction of the disparities among
countries and changes in the unfavorable competition conditions that still
prevail in the main markets, in which support policies for production,
contingent protection measures, as well as demanding technical barriers
that prevent access by weaker countries still prevail. And free trade,
understood in these terms and practiced under unequal conditions, only
benefits countries with higher levels of industrialization and
development.

From our perspective, a Free Trade
Area will represent an opportunity for all, if and only if the most
developed countries in the Hemisphere share the political, economic, and
financial costs of opening spaces for the productive efforts of the
smaller economies and the less-developed countries.

The creation of structural
convergence funds to finance infrastructure and services projects in
support of production is an essential mechanism for reducing the
asymmetries among countries.

This is a basic condition for
ensuring that a free trade area does not become a space in which the
countries with serious deficiencies in their production apparatus are
forced to incur excessive costs that affect the competitiveness not only
of their exports, but even of the part of their production destined for
domestic markets. Once the agreement enters into force, the level of
protection enjoyed by domestic production that enabled the sector to
remain active and generate the jobs that our citizens need will steadily
decline.

We wish to emphasize that a free
trade zone is not created solely by eliminating tariffs. Structural,
legal, institutional and economic convergence is vital to ensure that the
FTAA is a win-win situation. A free trade zone that opens up the
opportunities promised for everyone will depend on the level of solidarity
attained. It is time to think seriously about creating these Structural
Convergence Funds.

Proposals

We therefore propose that the
Consultative Group on Smaller Economies be transformed into a
Negotiating Group for the Treatment of the Differences in Size of the
economies and Levels of Development. This Group must receive a
clear and precise mandate for the formulation of provisions and mandatory
agreements referring to special and differentiated treatment for smaller
economies and less-developed countries.

Among these measures, this
Negotiating Group must prepare a concrete proposal on the FTAA Structural
Convergence Funds as a mechanism that contributes to the common objective
of creating a free trade area that represents a win-win alliance, a real
opportunity for all, regardless of the size of our economies and our level
of development.

1 See Kenneth Valley, “ The
Opening of the XV meeting of the FTAA trade area of the Americas
(FTAA)”.